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Pandemic Will Propel Commercial Delivery Drones

Drone Carrying a Box

By Joshua Flood, Valour Consultancy

With most of the cities around Europe, North America and Latin America (except perhaps Brazil) deserted and the majority of populations locked away in their homes, the start of 2020 has not been best. The service markets, such as restaurants, gyms, co-working spaces, have come to a grinding halt and many businesses and industries will be damaged for years to come. The tax hikes after this pandemic will be eye watering. It’s a strange period, and also very sad, with the high risk of fatality to vulnerable people with underlying health conditions or the elderly in our communities.

Nevertheless, with every negative, there will be positives. Supermarket sales soared in March and companies like Walmart, Carrefour, Tesco, Sainsburys and many more will have surpassed all their past Christmas sales records but there have been additional costs that weigh heavily against potential profits. Home exercise equipment manufacturers have been inundated with unexpected demands for stationary cycle bikes, treadmills and rowing machines. Consumer entertainment content platforms will be tallying up new subscriptions like someone seeing their winning lottery ticket balls slotting in, unless your platform relies on live sports. In today’s environment, I think I could create a global sport phenomenon in camel racing.

One of those positives will be a huge increase in home delivery, Tesco has added an additional 145,000 weekly home delivery slots, enabling it to make 805,000 deliveries each week, or 20% more than before. With social distancing and people staying in their homes for periods for unimaginable periods of time, drone deliveries make unparalleled sense

Irish drone company, Manna Aero, is to trial delivery services in Moneygall, a small village halfway between Dublin and Limerick in Eire in the second week of April 2020. Currently, the service is focusing on medicine delivery to vulnerable people locked in their homes. However, this could expand to food if successful.

Zipline, a US company renown for its work in Rwanda and Ghana, is applying with the FAA to launch its own medicine delivery service in the USA and UK. Also in the US, Matternet has teamed up with UPS for medicine deliveries in North Carolina, and with SwissPost, in Switzerland, for deliveries of lab supplies. Chinese internet conglomerate JD.com’s first delivery was to a village near Baiyang Lake in Hebei Province in the north of the country in February. In China, hotels were using robots to deliver food to rooms, although this is not an unmanned aerial system.

Alphabet’s Wing drone service has reportedly performed more than 1,000 deliveries in Australia and the US in the last two weeks. Wing drone service opened up for service in late 2019, working with Walgreens, FedEx and Super Magnolia (a local Virginia grocery store chain). The new service, in Christiansburg, Virginia, has allowed customers to purchase roughly 100 different products, over the counter medications or pre-built packages. The FAA approved Alphabet’s drone delivery program in March 2019, and the company announced its plans for ‘store to door’ delivery of more than 100 products in Virginia six months later. The delivery drones are claimed to have the ability to fly up to 120 km/h (almost 75 mph).

The delivery service which was rolled out in Christiansburg, Virginia, which is actually within a short distance from Wing’s testing zone – it has been testing drone delivery as part of the U.S. Department of Transportation’s Integration Pilot Program since 2016. For Wing, approval of its U.S. operations marks one of several major steps throughout 2019 that included a green light from Australia regulators who allowed public deliveries from the company in 2019 too. Its speed of acceptance has outpaced that of Google’s main competitor in the commercial drone space, Amazon, whose service, Prime Air, plans to deliver the company’s products straight to consumers’ doorsteps.

From a logistics industry’s perspective, drones represent one cusp of revolutionary change that will forever alter the way on-line goods are delivered. For food and small package delivery over the ‘last mile’, it can make little or no sense to send a ton of metal and a human to steer it. Replacing delivery drivers and couriers with lightweight energy-efficient UAVs, environmentally friendly, is accepted as the solution. In addition, there is no human to human contact.

It is believed there are at least 34 countries running or testing drone delivery services, either for medical, postal, food including pizza and coffee. In addition to those already mentioned, these include Australia, India, Singapore, South Korea, Thailand and Vuanatu in the Asia-Pacific region.

In Europe, Belgium, Denmark, Estonia, Finland, France, Germany (pizza), Iceland and Ireland have all tested or initiated drone deliveries. In the UK in December 2018, Vodafone tested drone deliveries in Portland Bill using their 4G mobile network rather than a radio transmitter and Amazon Prime has made a minimum of two trials of long-range drone operations near Cambridge and, in 2018, a fully piloted flight in East Sussex over a seven-mile route at about 400ft.

Also, German UAV company, Wingcopter is collaborating with UPS Flight Forward to develop a next-generation delivery drone solution for packages. UPS announced the launch of UPSFF in 2019, after getting FAA approval, Part 135 certification in September 2019, paving the way for the delivery service to fly further into the consumer market. UPS has since partnered with drone delivery company Matternet to ferry medical samples via drone at WakeMed hospital in Raleigh, N.C. Wingcopter and UPSFF will next seek regulatory certification for a Wingcopter unmanned aircraft to make commercial delivery flights in the United States.

Drone deliveries will never be a fit all solution but in circumstances such as today, drone deliveries make a lot of sense. In our latest commercial UAS platform report, we estimate nearly 3,000 systems were actively being used globally for drone deliveries. This figure will skyrocket in 2020 and 2021 beyond our highest predictions. We estimated the drone delivery service market was estimated about $2.3 million last year. By the end of 2020, this number of likely to be around $20 million as we see much greater deployment of systems, more start-up companies and also more partnerships and collaborations. For more information on our latest report, please contact us here.

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[fusion_builder_container hundred_percent="no" equal_height_columns="no" menu_anchor="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" parallax_speed="0.3" video_mp4="" video_webm="" video_ogv="" video_url="" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" overlay_color="" video_preview_image="" border_size="" border_color="" border_style="solid" padding_top="" padding_bottom="" padding_left="" padding_right=""][fusion_builder_row][fusion_builder_column type="1_1" layout="1_1" background_position="left top" background_color="" border_size="" border_color="" border_style="solid" border_position="all" spacing="yes" background_image="" background_repeat="no-repeat" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="0px" margin_bottom="0px" class="" id="" animation_type="" animation_speed="0.3" animation_direction="left" hide_on_mobile="small-visibility,medium-visibility,large-visibility" center_content="no" last="no" min_height="" hover_type="none" link=""][fusion_imageframe image_id="5349|medium" max_width="" style_type="" blur="" stylecolor="" hover_type="none" bordersize="" bordercolor="" borderradius="" align="none" lightbox="no" gallery_id="" lightbox_image="" lightbox_image_id="" alt="" link="" linktarget="_self" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset=""]https://valourconsultancy.com/wp-content/uploads/2020/04/Drone-Delivery-April-300x163.png[/fusion_imageframe][fusion_text columns="" column_min_width="" column_spacing="" rule_style="default" rule_size="" rule_color="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset=""] By Joshua Flood, Valour Consultancy With most of the cities around Europe, North America and Latin America (except perhaps Brazil) deserted and the majority of populations locked away in their homes, the start of 2020 has not been best. The service markets, such as restaurants, gyms, co-working spaces, have come to a grinding halt and many businesses and industries will be damaged for years to come. The tax hikes after this pandemic will be eye watering. It’s a strange period, and also very sad, with the high risk of fatality to vulnerable people with underlying health conditions or the elderly in our communities. Nevertheless, with every negative, there will be positives. Supermarket sales soared in March and companies like Walmart, Carrefour, Tesco, Sainsburys and many more will have surpassed all their past Christmas sales records but there have been additional costs that weigh heavily against potential profits. Home exercise equipment manufacturers have been inundated with unexpected demands for stationary cycle bikes, treadmills and rowing machines. Consumer entertainment content platforms will be tallying up new subscriptions like someone seeing their winning lottery ticket balls slotting in, unless your platform relies on live sports. In today’s environment, I think I could create a global sport phenomenon in camel racing. One of those positives will be a huge increase in home delivery, Tesco has added an additional 145,000 weekly home delivery slots, enabling it to make 805,000 deliveries each week, or 20% more than before. With social distancing and people staying in their homes for periods for unimaginable periods of time, drone deliveries make unparalleled sense Irish drone company, Manna Aero, is to trial delivery services in Moneygall, a small village halfway between Dublin and Limerick in Eire in the second week of April 2020. Currently, the service is focusing on medicine delivery to vulnerable people locked in their homes. However, this could expand to food if successful. Zipline, a US company renown for its work in Rwanda and Ghana, is applying with the FAA to launch its own medicine delivery service in the USA and UK. Also in the US, Matternet has teamed up with UPS for medicine deliveries in North Carolina, and with SwissPost, in Switzerland, for deliveries of lab supplies. Chinese internet conglomerate JD.com's first delivery was to a village near Baiyang Lake in Hebei Province in the north of the country in February. In China, hotels were using robots to deliver food to rooms, although this is not an unmanned aerial system. Alphabet’s Wing drone service has reportedly performed more than 1,000 deliveries in Australia and the US in the last two weeks. Wing drone service opened up for service in late 2019, working with Walgreens, FedEx and Super Magnolia (a local Virginia grocery store chain). The new service, in Christiansburg, Virginia, has allowed customers to purchase roughly 100 different products, over the counter medications or pre-built packages. The FAA approved Alphabet's drone delivery program in March 2019, and the company announced its plans for 'store to door' delivery of more than 100 products in Virginia six months later. The delivery drones are claimed to have the ability to fly up to 120 km/h (almost 75 mph). The delivery service which was rolled out in Christiansburg, Virginia, which is actually within a short distance from Wing's testing zone – it has been testing drone delivery as part of the U.S. Department of Transportation's Integration Pilot Program since 2016. For Wing, approval of its U.S. operations marks one of several major steps throughout 2019 that included a green light from Australia regulators who allowed public deliveries from the company in 2019 too. Its speed of acceptance has outpaced that of Google's main competitor in the commercial drone space, Amazon, whose service, Prime Air, plans to deliver the company's products straight to consumers' doorsteps. From a logistics industry’s perspective, drones represent one cusp of revolutionary change that will forever alter the way on-line goods are delivered. For food and small package delivery over the ‘last mile’, it can make little or no sense to send a ton of metal and a human to steer it. Replacing delivery drivers and couriers with lightweight energy-efficient UAVs, environmentally friendly, is accepted as the solution. In addition, there is no human to human contact. It is believed there are at least 34 countries running or testing drone delivery services, either for medical, postal, food including pizza and coffee. In addition to those already mentioned, these include Australia, India, Singapore, South Korea, Thailand and Vuanatu in the Asia-Pacific region. In Europe, Belgium, Denmark, Estonia, Finland, France, Germany (pizza), Iceland and Ireland have all tested or initiated drone deliveries. In the UK in December 2018, Vodafone tested drone deliveries in Portland Bill using their 4G mobile network rather than a radio transmitter and Amazon Prime has made a minimum of two trials of long-range drone operations near Cambridge and, in 2018, a fully piloted flight in East Sussex over a seven-mile route at about 400ft. Also, German UAV company, Wingcopter is collaborating with UPS Flight Forward to develop a next-generation delivery drone solution for packages. UPS announced the launch of UPSFF in 2019, after getting FAA approval, Part 135 certification in September 2019, paving the way for the delivery service to fly further into the consumer market. UPS has since partnered with drone delivery company Matternet to ferry medical samples via drone at WakeMed hospital in Raleigh, N.C. Wingcopter and UPSFF will next seek regulatory certification for a Wingcopter unmanned aircraft to make commercial delivery flights in the United States. Drone deliveries will never be a fit all solution but in circumstances such as today, drone deliveries make a lot of sense. In our latest commercial UAS platform report, we estimate nearly 3,000 systems were actively being used globally for drone deliveries. This figure will skyrocket in 2020 and 2021 beyond our highest predictions. We estimated the drone delivery service market was estimated about $2.3 million last year. By the end of 2020, this number of likely to be around $20 million as we see much greater deployment of systems, more start-up companies and also more partnerships and collaborations. For more information on our latest report, please contact us here. 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For The IFC Vendors Agile Enough To See Out COVID-19, The Need To Be Connected Will Be Greater Than Ever

By William Calvert, Research Analyst, Valour Consultancy

At this point, the assumption is that readers are fully aware of the context surrounding COVID-19, both in terms of cause, spread and implications, globally. Rather than focus on repeating what is already known, let us instead jump straight into reviewing the effects of this pandemic on the In-Flight Connectivity (IFC) competitive environment.

Fall in Active Installed Base

Amongst the early priorities for those in the IFC value chain is how to deal with existing IFC contracts that in almost all cases have become void because of the grounding of connected aircraft. Most, if not all, airlines are unlikely to be in a position to pay even the smallest portion of the contracted IFC fees without planes in the air and with very little room for negotiation this will very quickly hit service providers, especially those that have ongoing fees to pay to capacity owners.

Even assuming the spread of COVID-19 is brought under control in the coming weeks, it is difficult to envisage demand for travel by air returning to any sort of normality in 2020. We’re therefore not talking about a short-term fix here, but instead looking at renewed terms between all parties, perhaps an alternative approach to the longer-term business model and, in some case, vendors collapsing under the financial burden.

Stalled or Reduced Installation Programs

In the medium term, we must consider what the new commercial active fleet will look like. The fact airlines around the world are now the subject of sizeable government bailouts suggests we could see the vast majority survive long enough to see passenger demand return. But events like the 2008 global financial crisis also suggest we should expect to see airlines using the downturn in demand to retire aircraft early and slimming down fleets.

On top of this, the significant cost control measures now in place will almost certainly affect IFC retrofit programs throughout 2020 and will likely lead to delays, or the complete cancellation, of aircraft on order that are also ringfenced to have IFC hardware equipped at the factory.

In summary, what remains of the industry once all of this is over will more than likely be reduced versus the active fleet at the end of 2019. This in turn will impact IFC service providers, several of which have built sizeable backlogs, through delays/reductions to installation programs or potentially cancelling them all together.

Airlines Remain on the Fence

In the longer-term, a combination of prolonged cost cutting and the broader uncertainty that COVID-19 generates within the IFC supply chain could lead to implications for IFC adoption. Both factors represent significant change from the status quo and could justifiably lead airlines that are either in active negotiations around IFC implementation or were considering putting out an RFP, to push back the decision-making process until more certainty returns.

To help stimulate demand, what we could now see is the emergence of increased flexibility, in a number of areas linked to the provision of IFC. This could be an acceleration in the adoption of open industry standards to help keep services switched on if specific vendors do go under or if contract terms become unmanageable. It could also be greater flexibility in the business models agreed between capacity owners, service providers and airlines, with a greater share of ancillary revenue opportunities provided to those at the top of the chain.

The Need to be Connected Going Nowhere

So, is there a silver lining in all of this? I think so, and it comes down to our need to be connected. Sure, the existing business model is far from ideal, but this need to be connected everywhere was enough to encourage airlines of all sizes to activate Wi-Fi services and this demand will still be there when things get back to some level of normality.

There is even a case for self-isolation to be seen as an accelerator of the trend toward increased connectivity. In March 2020 alone:

  • U.S. telco Verizon has reported a 75% increase in gaming traffic in just one week.
  • Online shoppers have increased by 80% year-on-year in Brazil, 45% in Australia, 32% in France and 29% in Italy according to the Financial Times.
  • Disney+ is just one of the OTT suppliers reporting increased subscriber numbers, with U.S. numbers tripling across a two-day period.
  • Teleconferencing app, Zoom added 20 million mobile users in one week, according to Sensor Tower.

Whilst for many, this change in behaviour may only be temporary, some are likely to alter the way they view and partake in online activity forever, both socially and for work. There is every reason to suggest this change in behaviour could lead to increased use of IFC, either as improved take rates or demand for bandwidth. This should be something for the IFC value chain, whatever that looks like by the time demand does eventually return, to remain focussed on and prepare for.

Valour Consultancy will feature a more in-depth forecast for 2020 IFC installations and beyond in its ‘Future of IFC – 2020’ report, which is expected to publish in the coming months. For more information on this upcoming report, or Valour’s IFC Quarterly tracker, please contact us at: info@valourconsultancy.com

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[fusion_builder_container hundred_percent="no" equal_height_columns="no" menu_anchor="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" parallax_speed="0.3" video_mp4="" video_webm="" video_ogv="" video_url="" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" overlay_color="" video_preview_image="" border_size="" border_color="" border_style="solid" padding_top="" padding_bottom="" padding_left="" padding_right=""][fusion_builder_row][fusion_builder_column type="1_1" layout="1_1" background_position="left top" background_color="" border_size="" border_color="" border_style="solid" border_position="all" spacing="yes" background_image="" background_repeat="no-repeat" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="0px" margin_bottom="0px" class="" id="" animation_type="" animation_speed="0.3" animation_direction="left" hide_on_mobile="small-visibility,medium-visibility,large-visibility" center_content="no" last="no" min_height="" hover_type="none" link=""][fusion_imageframe image_id="5323|full" max_width="" style_type="" blur="" stylecolor="" hover_type="none" bordersize="" bordercolor="" borderradius="" align="none" lightbox="no" gallery_id="" lightbox_image="" lightbox_image_id="" alt="" link="" linktarget="_self" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset=""]https://valourconsultancy.com/wp-content/uploads/2020/04/person-holding-smartphone-inside-airplane-1647116-scaled-e1586136658649.jpg[/fusion_imageframe][fusion_text] By William Calvert, Research Analyst, Valour Consultancy At this point, the assumption is that readers are fully aware of the context surrounding COVID-19, both in terms of cause, spread and implications, globally. Rather than focus on repeating what is already known, let us instead jump straight into reviewing the effects of this pandemic on the In-Flight Connectivity (IFC) competitive environment. Fall in Active Installed Base Amongst the early priorities for those in the IFC value chain is how to deal with existing IFC contracts that in almost all cases have become void because of the grounding of connected aircraft. Most, if not all, airlines are unlikely to be in a position to pay even the smallest portion of the contracted IFC fees without planes in the air and with very little room for negotiation this will very quickly hit service providers, especially those that have ongoing fees to pay to capacity owners. Even assuming the spread of COVID-19 is brought under control in the coming weeks, it is difficult to envisage demand for travel by air returning to any sort of normality in 2020. We’re therefore not talking about a short-term fix here, but instead looking at renewed terms between all parties, perhaps an alternative approach to the longer-term business model and, in some case, vendors collapsing under the financial burden. Stalled or Reduced Installation Programs In the medium term, we must consider what the new commercial active fleet will look like. The fact airlines around the world are now the subject of sizeable government bailouts suggests we could see the vast majority survive long enough to see passenger demand return. But events like the 2008 global financial crisis also suggest we should expect to see airlines using the downturn in demand to retire aircraft early and slimming down fleets. On top of this, the significant cost control measures now in place will almost certainly affect IFC retrofit programs throughout 2020 and will likely lead to delays, or the complete cancellation, of aircraft on order that are also ringfenced to have IFC hardware equipped at the factory. In summary, what remains of the industry once all of this is over will more than likely be reduced versus the active fleet at the end of 2019. This in turn will impact IFC service providers, several of which have built sizeable backlogs, through delays/reductions to installation programs or potentially cancelling them all together. Airlines Remain on the Fence In the longer-term, a combination of prolonged cost cutting and the broader uncertainty that COVID-19 generates within the IFC supply chain could lead to implications for IFC adoption. Both factors represent significant change from the status quo and could justifiably lead airlines that are either in active negotiations around IFC implementation or were considering putting out an RFP, to push back the decision-making process until more certainty returns. To help stimulate demand, what we could now see is the emergence of increased flexibility, in a number of areas linked to the provision of IFC. This could be an acceleration in the adoption of open industry standards to help keep services switched on if specific vendors do go under or if contract terms become unmanageable. It could also be greater flexibility in the business models agreed between capacity owners, service providers and airlines, with a greater share of ancillary revenue opportunities provided to those at the top of the chain. The Need to be Connected Going Nowhere So, is there a silver lining in all of this? I think so, and it comes down to our need to be connected. Sure, the existing business model is far from ideal, but this need to be connected everywhere was enough to encourage airlines of all sizes to activate Wi-Fi services and this demand will still be there when things get back to some level of normality. There is even a case for self-isolation to be seen as an accelerator of the trend toward increased connectivity. In March 2020 alone:
  • U.S. telco Verizon has reported a 75% increase in gaming traffic in just one week.
  • Online shoppers have increased by 80% year-on-year in Brazil, 45% in Australia, 32% in France and 29% in Italy according to the Financial Times.
  • Disney+ is just one of the OTT suppliers reporting increased subscriber numbers, with U.S. numbers tripling across a two-day period.
  • Teleconferencing app, Zoom added 20 million mobile users in one week, according to Sensor Tower.
Whilst for many, this change in behaviour may only be temporary, some are likely to alter the way they view and partake in online activity forever, both socially and for work. There is every reason to suggest this change in behaviour could lead to increased use of IFC, either as improved take rates or demand for bandwidth. This should be something for the IFC value chain, whatever that looks like by the time demand does eventually return, to remain focussed on and prepare for. Valour Consultancy will feature a more in-depth forecast for 2020 IFC installations and beyond in its ‘Future of IFC – 2020’ report, which is expected to publish in the coming months. For more information on this upcoming report, or Valour’s IFC Quarterly tracker, please contact us at: info@valourconsultancy.com [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]